Korea Gas Corporation (KOGAS) (CEO, Choo Kang-soo) said on September 14 that it succeeded in issuing five-year and eight-year Swiss franc bonds (a total of 350 million Swiss francs) with interest rates of 2% and 2.875%, respectively. For those percentages, 1.17% and 1.50% spreads are added respectively to Switzerland’s base interest rates.
An official from KOGAS said that it is becoming more difficult to finance foreign currency due to volatile international financial market conditions, such as the recent financial crisis in Europe. This has led to a dramatic increase in spreads on Korean bonds denominated in foreign currencies. Against this backdrop, KOGAS was able to successfully take advantage of this by strategically selecting and issuing Swiss franc bonds as they are more stable than highly-fluctuating dollar bonds.
By once again successfully issuing foreign bonds in the Swiss financial market, KOGAS is now able to secure long-term liquidity with low interest rates. The company has also successfully issued 8-year foreign bonds, the longest maturity period. The fact that it offered a dual-tranche structure, utilizing both 5-year and 8-year bonds, enabled it to attract a variety of investors and create more favorable conditions than issuing dollar bonds.
KOGAS plans to use funds raised through the issuance of such bonds to develop overseas resources, an area it has begun to focus on.
Meanwhile, KOGAS announced on July 22 that it will receive the first batch of oil (approximately 400,000 barrels of Basra Light Crude) in late July as remuneration for the development of Iraq’s Zubair oil field.
It is the first delivery of crude oil since KOGAS signed a contract with an Iraqi state-owned company in February last year. KOGAS, and its project partner “Occidental,” will receive a total of 1 million barrels, with the planning to sell them on the international market.
The Zubair field is a super-size oil field located near Basra, a city in the southern part of Iraq. KOGAS has been working on the project with Eni (operator of Zubair field), Occidental (an American oil and gas exploration & production company), and Missan Oil Company (Iraq stated-owned oil & gas company) under the goal of producing a maximum 1.2 million barrels a day (a total of 6.4 billion barrels over a 20-year period) through the restoration and redevelopment of the war-stricken and dilapidated Zubair oil field (KOGAS owns an 18.75% stake in the consortium).